Can Your Small Business Really Compete with “Big Businesses” for Government Business? Absolutely.

Sep 25, 2018

Bidsync Industry Blog

Some say big businesses will always try to squeeze out smaller competitors in a bid to take over a particular market segment. You may just be concerned that a few big businesses seem to be winning every government bid in your target market, which reduces your potential revenue stream and shrinks your bottom line (and growth potential). But, we’re here to tell you that this perception of big business dominance in the government contracting world is not reality. Yes, there are certainly some larger defense contractors that are repeatedly short-listed for multi-million and multi-billion-dollar Department of Defense (DoD) contracts. But the DoD, just like every other federal agency, has set aside contracts for small businesses along with small business contracting goals, which they consistently meet. (More on that below.)

Plus, there are more than 90,000 public sector agencies in North America. (Can you see your sales pipeline and potential revenue stream growing already?) That means there are at least 89,999 other agencies that rely on a diverse mix of suppliers – such as your business – to fulfill their many internal customer requests for goods, services, construction, and more.

In fact, many public sector agencies are vocalizing their continued priority to source from small-to-medium businesses (SMB) whenever possible. At the end of the day, public sector customers are no different than private sector customers: They just want the best quality solution at the best price.Business size does not matter. What does matter is your ability to meet their specific requirements (including delivery times, quality, quantity, etc.) and your ability to provide the technical expertise required (for services, systems and construction). In fact, some agencies are recognizing – off the record – that smaller businesses and startups that are hungry for their business will often provide better customer service. They want a foot in the door and will do what it takes to deliver top quality goods and services to secure repeat busines.

Even better, many municipalities want to protect their local economies. That means that they will continue to give preference to local business, startup, small business, and disadvantaged business entities (DBEs) when making certain types of purchases. That revenue stays in their community, driving business growth, jobs and the overall strength of their economy. Higher education and nonprofit entities also value that woman, minority, veteran and locally-owned businesses bring to their programs; that is why many have expressed plans to maintain special buying programs aimed at sourcing first from DBEs for many contract categories as well as contracts below certain dollar thresholds. As long as vendor sources are available.

Many agencies, including those at the federal level, are indicating a lack of competition in solicitations set-aside for small businesses and other DBEs. In June 2018, the Small Business Administration (SBA) gave federal agencies an ‘A’ on this year’s government-wide scorecard after meeting their small business contracting goal, which is to award 23 percent of prime contract dollars to these types of suppliers Yet, upon closer investigation, you will see that a mere 200 small businesses won 25 percent (i.e. $28 billion) of the $110 billion in prime small business dollars awarded by federal agencies in fiscal 2017. There are 58 million small businesses in the United States today, just to put this in perspective.

In other words, there are plenty of big opportunities for small and disadvantaged businesses in government contracting. Even if “big business” takes a sizable chunk of the market. That is why it is so important that you consistently leverage the following best practices to mine the government marketplace, find your niche and successfully compete against businesses of all sizes:

Educate public sector buyers – They buy everything from pencils to parking lots on any given day. While procurement officials conduct a lot of market research, they are rarely subject matter experts on every good, service, construction, or technology system they purchase. That is why they value businesses like yours; they appreciate your ability to help identify emerging solutions, explain technical specs, and justify certain purchases to their customers and bosses based on other use cases.

Offer a better option –Just as you would build your brand and build relationships with buyers in a B2B or B2C model, it is important to sell yourself to B2G customers. Prove why it would be smarter, and just as easy, to source from you (or via the open market). Part of this is tied to the education effort we described above. However, this is a best practice that also carries over to industry or agency networking events and even your RFP or bid response. Help influencers and decision-makers, including procurement officials) understand why it would be a smarter choice to source from you or companies like yours via open solicitations versus going with a pre-negotiated, multi-use contract that relies on the same big businesses to (hopefully) fulfill all requirements. Can you deliver a better-quality product? Offer a lower price? Guarantee faster delivery or better customer service? If you can convince procurement officials that it would be in their best interest to issue a new solicitation or use other contract vehicles to meet their requirements, then at least you will have an opportunity to submit a proposal in the open market. Just be sure that your efforts to encourage a different sourcing model are not perceived as unethical.

Play up your strengths – Don’t discount the power of being a small, local, or disadvantaged business entity. Women, veterans, and minorities all receive priority preference for many state and municipality solicitations as noted above. And we don’t see any indication that this will change on a large scale any time soon. In fact, there are widely publicized, high-dollar solicitations right now aimed solely at small businesses, including this one.

Most importantly, be resourceful and optimistic – Yes, there are tens of thousands of public sector agencies that tap into co-op contracts for certain types of purchases or defer to bigger contractors when soliciting for more innovative projects. But both scenarios present equal opportunities for small businesses. Just look at NASA’s latest push to recruit small business participation in its contract solicitations. Or the open SBA solicitation: The organization has set aside an entire $40 million technology contract for small businesses. Clearly, many agencies are trying to level-set. Plus, recent data indicates that there is an uptick in new solicitations and/or spend for certain categories such as janitorial and cleaning services, computers, network equipment, cellular telephones and other technology equipment.

Takeaway: Do not assume that big businesses dominate government contracting, or that changing acquisition models will favor marketplace-type buys and take away your potential public sector revenue. There are plenty of solicitations still being posted every single day for businesses like yours. In fact, many federal, state and local agencies want more businesses like yours to respond to solicitations; they want to expand beyond the same one or two vendors bidding on the same contracts over and over. Increased competition is good for them, just as a current lack of competition is good for you. Use tools such as BidSync to keep a close eye on the many thousands of RFPs/IFBs posted every day by the more than 90,000 North American agencies that can and should be in your sales pipeline.